How to Setup and Calculate Shipping Rates on Shopify

If you have read our article about how to set up local delivery in Shopify and have successfully enabled local delivery within your online store, it’s now time to figure out what to charge your customers to ship their items. This can be challenging, especially when it’s your first time offering this service. You want to make sure you’re charging enough whilst still being kind to your customers. 

Sometimes, it can be daunting to see your prices jump up to incorporate a shipping cost. Nonetheless, it’s crucial to cover all related expenditures to make this service sustainable for your business. This article breaks down everything you need to know about how to set up and calculate Shopify shipping rates. By the end of this article, you will have a better understanding of the different elements of Shopify shipping rates and how to incorporate them into your online store.

What are Shopify Shipping Rates?

Shipping rates are what you charge your customer for the delivery of their goods. When a customer proceeds to pay, the shipping rate for their order will be added at the checkout of your Shopify store.

There are several types of shipping rates that you will need to consider:

Local Delivery Rates

If you’ve enabled local delivery in Shopify, you will need to set up a minimum order amount to qualify for shipping and the rate you will be charging. This will be displayed when your customers select local delivery at checkout.

If you use an app within your Shopify store instead of the built-in delivery feature, then you will have more control over the shipping rates you charge. For example, using Amai Local Pickup & Delivery allows you to set up unique local delivery rates and request deposits, depending on the purchase.

Free Shipping Rates

Free shipping rates are straightforward; it means that there is no charge to the customer for shipping their order. You can apply free shipping as a flat rate sitewide, meaning all products are eligible for free shipping. Alternatively, you can also apply it to certain purchases, for example, free shipping on orders over $50 or $100, and so forth. A major advantage of offering free shipping is that it could potentially reduce cart abandonment. A Baymard Institute report shows that 48% of cart abandonment is due to extra costs, including shipping fees. Also, 76% of shoppers are more likely to complete a purchase if delivery is free. This means offering free shipping can reduce cart abandonment and make customers more likely to buy from you. When offering free shipping, it’s important to weigh this against the operational cost, as you will be bearing all the shipping costs, which could eat into your profits.

Flat Shipping Rates

Flat shipping rates are more complex than free shipping rates, but they are a helpful way to control specific shipping costs. Flat shipping rates in Shopify can be weight-based, price-based, or a general rate, irrespective of the weight or size of the order.

Flat shipping rates can be customized in the following ways:

  • Weight-Based Flat Shipping Rates: This will allow you to set different shipping rates depending on the minimum and maximum total weight of the final order. For example, orders under 5kg may cost $3.99, orders between 5 to 10kg at $5.99, and orders 10kg plus $8.99. To do this, you would set a flat shipping rate per weight category.
  • Price-Based Flat Shipping Rates: Much like weight-based shipping rates, you can set a shipping rate depending on the amount spent. For example, orders under $50 may be charged $5 for delivery, and orders over $100 qualify for free shipping. You can set the different shipping rates per price category in your Shopify settings.
  • General Flat Shipping Rates: General shipping rates are applied to all orders, depending on the type of shipping chosen by the customer. This applies when you have a set rate for different local delivery methods.

For example, setting your standard shipping rate to $5 and express shipping rate to $10, regardless of what the customer orders.

Calculated Shipping Rates

Calculated shipping rates are based on the charges set by your chosen courier. When a customer proceeds to checkout, their order information will be automatically sent to the courier, who will generate a shipping cost.

This can be an effective way to protect your business from rising fuel charges that you may not have accounted for in your set rates. However, the ability to directly link a courier to your delivery settings depends on the Shopify plan you are subscribed to and your location.

How Do I Decide What Shopify Shipping Rates to Charge?

There are several costs you need to consider when planning what to charge your customers for delivery services. These can include courier charges and packaging at a basic level, scaling up to include fulfillment costs if you need to outsource a logistics service provider for drop shipping or managing and processing orders at a large scale.

When deciding on what Shopify shipping rates to charge your customers, you will need to create a shipping strategy that covers the relevant costs whilst providing good value for your customers.

Take the following factors into consideration when planning your Shopify shipping rates strategy:

Calculate the Average Weight of Your Product Library

If you don’t have one already, we recommend starting a database that records the weight and cost of each item sold on your online store.

Shipping rates are commonly based on weight, so documenting this will allow you to compare product weights against your courier’s charges. It’s also useful to have the value to hand in case some couriers charge more for items that exceed a certain amount.

With this information, you can calculate your products’ average weight, allowing you to use a weight-based flat rate. This can be a great strategy for new businesses that need the full shipping cost to be included in the sale.

Charge Exact Shipping Rates

If you’re starting a new business, you may not be able to cover any portion of the shipping costs. In that case, you should start by setting your shipping rate to the courier’s exact charge.

This is the calculated shipping rate and can be enabled automatically depending on your location and Shopify plan.

Revise Your Product Price List

If you want to offer a free shipping rate without breaking the bank, then you should update the prices you are charging to incorporate the average cost of shipping per item.

Offering free shipping is a great way to retain customers. In fact, a study by the National Retail Foundation found that 75% of consumers expect free delivery, and 65% check that the delivery is free before proceeding to checkout.

Increasing the price of your products to include shipping is a beneficial marketing strategy and adds value to your offer without costing your business.

Your shipping strategy will likely change depending on your level of success and what stage your business is currently going through. 

How to Set Your Shopify Shipping Rates

In order to set up your Shopify shipping rates, you can either use Shopify’s built-in local delivery feature or a Shopify app. 

Built-In Shopify Local Delivery

Shopify’s built-in local delivery is a straightforward way to set up Shopify shipping rates but can be limited depending on the plan that you are subscribed to and your location.

Shopify’s local delivery allows you to manually set the different types of rates that we have discussed. Remember, the customer’s eligibility will depend on their postcode or radius from your fulfillment center.

Within your Shopify settings, you can apply shipping rates to different zones, delivery types, or order-specific factors. Go to settings, click shipping & delivery, and then navigate the different local delivery options.

App-based Shopify Local Delivery

Applications are designed to provide solutions for specific functions. Thus, it’s no surprise that using a local delivery app within your online store will give you more control over the setup of your Shopify shipping rates.

Introducing Amai Local Pickup & Delivery

Amai Local Pickup & Delivery is an app designed to make everything about Shopify local delivery smoother and more streamlined. It enables merchants to set unique local delivery rates by selecting from predefined rate categories, ensuring flexibility in pricing strategies. This app simplifies the customization and optimization of local delivery and pickup options to enhance operational efficiency and customer satisfaction.

Features and Advantages of Local Pickup & Delivery

  • Bulk Upload Locations: The app saves merchants significant time by allowing the bulk upload of delivery locations. Rates can also be set in bulk, streamlining the setup process for widespread delivery options and ensuring consistent pricing across multiple areas.
  • Unique Local Delivery Rates: Merchants have the flexibility to choose from various rate categories, enabling them to apply specific, unique rates to local delivery orders. This customization allows for tailored pricing strategies that adapt to different delivery conditions and customer needs.
  • Request Delivery Deposits: By allowing you to request delivery deposits, this app provides a layer of financial security for both merchants and customers. A deposit is paid upfront with the remaining delivery charge due upon receipt, reducing the risk of unpaid deliveries and enhancing trust in the transaction process.
  • Add Shipping Tags: The ability to add shipping tags helps merchants efficiently separate local delivery orders from other order types in the Shopify admin panel. This organizational tool aids in the quick identification and processing of local deliveries, improving order management and fulfillment accuracy.
  • Round-the-Clock Support: The availability of 24/7 live chat support and developer assistance ensures that businesses have the help they need whenever they need it, facilitating seamless integration and maintenance of the pickup and delivery system.

Useful Tips

  • Clearly communicate delivery policies to manage customer expectations.
  • Use limited-time free or discounted delivery to attract customers.
  • Periodically reassess delivery fees and policies based on feedback and costs.
  • Utilize insights from customers to refine delivery service and pricing.
  • Offer eco-friendly packaging for local deliveries to appeal to environmentally conscious customers.
  • Collaborate with local couriers or delivery services for efficient and cost-effective deliveries.

Summary and Advice

Setting appropriate shipping rates is an essential aspect of running a successful e-commerce business, as it directly influences profitability, customer satisfaction, and competitive edge. While free shipping rates are sure to attract customers, it’s important not to do it to the detriment of your business. It is better to take a more measured approach that benefits your business without alienating your customer base. For Shopify stores, an app like Amai Local Pickup & Delivery can prove quite useful in getting your shipping rates right without much hassle. With features designed to optimize the logistic side of your Shopify store, it guarantees that your shipping rates are aligned with the business’ operational capacity.